Startup Whisperer

S#&% Eating Grin

A good CEO friend used to tell me that no matter what is happening in your company, "wear a s#$& eating grin."  I'd rather put it as putting on the cowl of leadership and stalwartness on every day.  Startups are a roller coaster ride and if you as CEO are having a bad day; that really does rub off on your team.  You could simply have a headache or there could really be something going on in the business that you don't like.  It doesn't matter.  Your attitude and persona positively (or negatively impacts) your company.  I am not advocating that you walk the halls like some crazed cheerleader (perhaps the best example ever from Steve Ballmer).  Consistently reporting operating results to the company (high-level goals, sales wins, etc), regular company meetings, and generally being available and open to feedback/questions are simple things that you can do to make sure that everyone knows that the ship is moving in the right direction. 

Customer-centric product development

The days of waterfall product development planning are over (unless you work at Microsoft).  Meaning that formal product requirement planning documents, formal specs, development plans etc. all packaged in a linear planning sequence (which make for 12-18 month shipping cycles) are gone the way of the Dodo bird.  However, that doesn't mean that you don't do strategic planning around what you develop and why you are spending effort on a feature.  Resource allocation in startups is typically a lot easier than in established, large organizations.  Of course, deciding on what to build in startups doesn't give your organization a lot of room for error.  One wrong step or a series of wrong bets can cost you the fast mover advantage which is so key when growing market share. 

As long as you have specific priorities, then your functionality requirements are generally very clear.  Instead of laying out every feature by work effort (how many developer days is takes for each feature) and then defining what a release looks like, I like to layer product releases around customer value.  On the x axis of the grid you lay out the customer pain points while the y axis details the different levers that you can apply to those pain points.  Order the buckets on the y axis from low development investment/low impact to high development cost/high impact (left-to-right).  That will force you to consider (and decide to develop) against big bets versus always making the little bets.  A series of little bets means yet another "me-too" product and no market adoption.  Layering your product development planning around customer proposition wants and needs will enviably force you to build better, more customer centric products.

Notes From OMMA Global March 2008

Just getting back from the OMMA Global Confernence in Hollywood.  The theme of the show was "welcome to the machine."  Meaning that the advertising business is getting more consistently machine automated and moving online.

One of the more interesting keynotes was from Comscore's CEO, Gian Fulgone.  His speech titled
"The Internet Machine Spits Out: Media Dust!"  I'll link to the slides once they are posted but his speech was not surprisingly full of data.  Here were some nuggets:

• Only 1/3 of online advertising is branding oriented
• Online advertising was $21.1 billion in 2007;  41% of that was search, 24% display, 17% classifieds, 10% rich media, and the rest "other". 
• Total US Media business is $296.1 billion - only 7% is online
• Only 7% is online but 17% of all media is consumed online
• Only 3% of packaged goods companies spend money online (25% for financial services)

One of the things that struck me as interesting was the themes that I found myself trying to answer 10 years ago in online advertising-namely how do you consistently measure it.  Some interesting stats from his talk:
- in 60 years of TV, there have been only 5 metrics to define the business
- in 13 years of online advertising, there are 13 types of metrics

The themes of having too much data were definitely echoed at the conference and having more focus on paying attention to the right data.  Gian made mention of how CTRs are not relevant
to judge true performance due to the nature of who is really clicking on these ads. He cited that 50% of all clicks are heavy clickers with demographics that are not big brand friendly: 25-44 males making under $40K.  I'll direct readers back to my post on this subject. 

Have you ever heard of Comscore underreporting your traffic?  Of course.  Gian did a nice job of explaining that 30% of Internet users delete their cookies.  Of that population, they delete them 4x month-he thinks that there is a 2.5x overstatement of of UUs in most companies search logs.

The day was full of some interesting keynotes from Patrick Keane, EVP/CMO of CBS Interactive.
Patrick did a great job of showing the metrics that they follow to track different metrics alongside offline media.  Patrick Keane is someone I knew when he was an analyst at Jupiter.  He had some interesting points and conceptually I didn't think about the PV implications of some of the new mediums like Facebook and YouTube in terms of pageviews over the last 18 months.  Do an Alexa search and check it out for yourself.  Pretty wild to think that YouTube has such a large footprint and still only 2% of impressions when compared to TV.

Johnathan Miller and Ross Levinsohn talked a lot about their interest in the prosumer content creation space.  They think that the UGC content adds bulk but little value and the that the "super-sumer" content is primarily high quality yet re-purposed TV content.  Hmmmm.  I must admit that a lot of what these keynotes opined about was what we were thinking about years ago at Atom-content distributed everywhere, anytime, and how you want it.

The sexiest word in business is 'scale'

Scale means that as you grow market share, you are able to command higher margins in your business, amortize fixed costs across and ever growing base of topline revenue, and yes "own" your competition.  The steeper the residual demand curve the great the degree of market power.  Man, this is sexy.  Really sexy. 

I've worked for a couple of companies that tried to compete with Microsoft (WRQ and RealNetworks).  Now, these companies are still going (and profitable).  But, competing with a company like Microsoft where they can throw a feature (that might have been your startups main product line) into an operating system for free.  Boy, that's scale advantage. Yes, I don't want to open up old Seattle wounds here (with the "M" word). 

A great case in point is Google.  Henry Blodget just published a very interesting article on how Google continues to kick butt against online and offline media. Some interesting stats from the article:

    * Online ad revenue at Google grew 44%, or $2.7 billion.

    * Online ad revenue at Yahoo, Microsoft, and AOL grew only 15%, or $1.3 billion.

    * Google captured 2X as much revenue as its closest three competitors combined.

Very wild to think that the online ad category grew by 28%  and that Google captured the majority of that share.  Very interesting to see offline media growing only at 3%.

When you have this kind of share growth you'll just continue to take costs out of the supply chain.  Since Google owns Performics and DoubleClick, why wouldn't they just start offering ad management and serving for free?  Oh, wait they already announced this last week.  Google can shrink markets (web analytics, ad serving, offline media, etc) while keeping margins healthy.

We have seen the reports about Google's QoQ click decreases (net effect is lower eCPMs).  Sure, but, when you are playing the scale game, you can afford to play with your operating dials.

Craigslist versus recruiters

I have a lot of recruiter friends.  Recruiters have a valuable place in the industry, particularly for finding executive talent.  However, I am personally not a fan of hiring non-executive talent through recruiters since you pay 6-10%  of the candidates first year salary (even if the hire turns out to be a dud).  I've personally had more success with Craigslist than using a recruiter. 

When should you use a recruiter?  Consider the case if you are not a technical CEO and/or new to a job market in which your company is founded.  I've had lots of friends who have moved into new markets (where they don't have a strong network) that have had very successful experiences with recruiters.  Another great reason is if you need to grab someone from a competitor, parallel industry, or find someone with domain experience in an industry that you are not familiar with.

My quick take on do's and don'ts on recruiters is:

• Hire them for executive talent
• Negotiate hard for their commission - consider payment in stock to free up your cash
• Get references before you pick one -- don't choose recruiters that call you. Ask your own social network which recruiters that they have had good experiences with.
• Pay the bucks to get the nerd - If you are a startup CEO without a strong technical leader (aka CTO), then use a recruiter ASAP since technology startups are all about fast execution and strong technical talent, you will need a rock star technical leader.

I've had great experiences with recruiters.  Here are some folks to consider:

• Best Silicon Valley Recruiter - Definitely Jana Rich from Russell Reynolds - she is one of the best (if not the best) in the business. She must have an incredible memory of the best CRM system -- she everyone and is worth every penny.  A great pick for the Valley.
• Best Seattle recruiters
  • Dave Hardwick - very solid for technical recruiting.  Very professional.  Check out his blog at:  http://jobhacking.typepad.com/
  • Kevin Hartz of Herd Freed Hartz - he knows everyone and knows all of the right people to call in the Seattle area.  He's good at finding executive talent.
  • Zeteo - the best firm that you have never heard of.  Good crew between Eric Hinz, Matt Davis, and his sister Robin Davis.  They are scrappy and perhaps the most tenacious group of folks out there today.  Matt Davis' email:  mdavis@zeteoinc.com

Nickels out of toilets

One of my favorite comments that I have ever heard concerning what types of entrepreneurs are successful was from venture capital's wunderkind Mike Moritz from Sequoia Capital.  Mike was on our Board at Atom Entertainment and I remember him telling me years ago that he liked entrepreneurs (and their cultures) that "dove into the toilet for nickels."  While the visual may not be universally appealing, I believe in this wholeheartedly. 

You can't teach someone to be scrappy.  They just are scrappy.  I have found it very difficult to hire people form big companies and have them adjust to the real-world of a startup.  It is a shock to their system.  In fact, many big company types can't adjust at all. When I talk to other startups, a couple of back-of-the-envelope questions are always in my mind that act as a litmus test for scrappiness (w/out having to look at their cash flow statements):

• Does the CEO have an administrative assistant (or do they book your own travel, appointments, etc)?
• Does the company have a tight T&E philosophy? Are they booking travel using discount sites like Priceline, Hotwire, Expedia?
• Is the computer hardware purchased either used and/or through eBay?
• Did the business get the cheapest rent that they could (try to get the cheapest Class B space that you can get assuming you need 165-200 square feet per employee)?
• Are they paying for "senior" consultants to do roles like business development, marketing, etc?
• Does the startup use recruiters for non-executive positions (more on recruiters in an upcoming post)?
• Does the business have only two management layers (aka from the coder to the CEO) for an under 15-20 person business? 
• Is the business using Amazon Web Services (Simple Storage Service, Elastic Compute Cloud, Simple DB)?

If I get more than a couple of no’s out of the list, then I start to get worried (and very opinionated).

One of the scrappiest examples I thought of as I was writing this post was how the original founders of hotels.com (Dave Litman, Bob Diener) would star in their own TV advertising because they were too cheap to pay for actors.  It was basically them in different scenarios negotiating better deals (e.g, one memorable ad had them at the ballpark negotiating down the price of their hotdogs). 

Remember that your burn rate is a very real thing.  You need to manage it and savor every nickel.  As your business ebbs and flows, you’d much rather be in a position of financial strength then down the proverbial toilet.

Align priorities on a weekly basis with 1:1s

Sometimes I feel like startups mirror the famous quote from Erasmus -- "startups, can't live with them, can't live without them."  Why do I say this?  So much happens on a daily basis that keeping everyone synced up around your company's initiatives is extremely important.  Hopefully, your objectives don't change on a weekly basis.  If so, you have bigger problems.

One management tactic that is pretty tried and true for any company is to do weekly 1:1s with your key reports.  You might be asking yourself if this is silly when you are a small company.  I don't think so.  If you are a one-person company then you should be doing this with yourself (which is still legal in most of the U.S.).  Big companies talk about setting SMART goals.  I think a nimbler way to goal
tracking is to list out your top 3-5 initiatives and track against your progress to your  quarterly goals every week.  Its a great way to avoid the temptation of doing too much at once or having your company not focused on the right priorities.  This is a sample 1:1 management-by-objective sheet that I have been using for years (sample: Download sample_mbo_format_v2.pdf ).  Have your employee fill it out every week before your meeting.  That gives you time to think about areas of improvement, tactic changes, etc.  More importantly, it also give you a chance to get feedback about yourself, new product ideas, etc. This exercise should be full of known expected priorities with completion dates and/or progress on your goals.  If not, then its a great way to get you and your team aligned.  I would recommend that you review completed items as well as areas that are 'non-priority.'  Lots of startups have crazy paces but are even crazier when there are 10+ initiatives--no company can be successful doing too much.